Hobbits, Orcs Sue New Line

A group of New Zealand based actors has filed suit against New Line Cinema claiming the studio has failed to abide by contract terms relating to merchandising rights for the Lord Of The Rings movies.

Specifically, the lawsuit claims that the actors were entitled to 5% of the net revenue from sales of merchandising bearing the likenesses of their characters.    New Line's earnings from Merchandise reportedly exceed $100 Million.

The case once again calls into question the “Hollywood accounting” used by studios and distributors, to make $100 Million in revenues look like a deficit situation, by taking deductions for distribution fees, gross-participations, and overhead and interest before arriving at the bottom-line “net revenues” figure.

The accounting system has been repeatedly challenged in the courts, most notably by humorist Art Buchwald, who developed a treatment that was later developed into the hit Eddie Murphy film “Coming to America”, which despite hundreds of millions in worldwide gross earnings, continued to show a net loss, depriving Buchwald of his so-called ‘back-end' compensation.    Buchwald won at trial, garnering several key rulings in the case before the matter was settled before the studio's appeal was decided.   Buchwald's attorney, Pierce O'Donnell recounts the case  in his book “Fatal Subtraction”.

The current Lord Of The Rings case is  not just a case of a few disgruntled actors.  The trilogy's director, Peter Jackson, is also suing the studio, claiming he's owed as much as $100 Million for the trilogy.